Monday, December 15, 2014

Oil Prices Continue Falling

Russia Raises
Interest Rate to 17% to Shore Up Ruble – Rial Tumbles to 35,000 against the
Dollar

Oil
prices continued falling today, with Brent crude closing at $60.51 a barrel. A
Bloomberg survey of 17 oil analysts on Sunday showed they expect the prices
slide to as low as $50 a barrel in 2015. The UAE oil minister said today in Abu
Dhabi that OPEC would not intervene by limiting output even if the price hits
$40 a barrel.

In
Russia, the plummeting oil prices caused the ruble tumble past 64 against the
dollar for the first time. In January, the rate was 33 rubles per dollar;
meaning the national currency has lost half its value this year. Russia has
spent $80 billion of its foreign-exchange reserves in an unsuccessful attempt
to prop up the ruble.

The
Russian Central Bank, after an unusual early morning emergency economic meeting
in Moscow, announced at 1 a.m. local time on Tuesday that it would raise its
key interest rate to 17 percent from 10.5 percent, effective Tuesday, to shore
up the ruble. The 17-percent interest rate, although it could strengthen the
ruble in the short term, could significantly slow the country’s economy, which
is already under sanctions for Crimea annexation.The
economies of Venezuela, Nigeria, Iraq and Iran are also under severe pressure
from the falling oil prices. Venezuela might not be able to pay loan payment of
more than $21 billion in 2015, which will force the country into default.
Nigeria has devalued its currency to lowest levels seen. And Iranian currency
rial today traded at 35,000 against the dollar, a loss of 20 percent in value
since January. Iraq, in the midst of a growing war, can also ill afford the $60
oil.

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